Sell sell sell

The focus for streaming services has been subscriber acquisition and growing the subscriber base. The more subscribers a service gained, the more appreciation from Wall Street. Recently the focus has slightly shifted also towards revenues, even if subscriber growth still gets the most attention. Looking at the major streaming providers (Netflix, Disney, Warner Bros Discovery, Paramount, and Peacock) only Netflix shows a positive EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). All the others presented negative earnings in the last quarterly earnings report.

But even with positive results in terms of revenues and earnings, Netflix has folded and turned its attention to advertising, games, and merchandise. Streaming video is simply not enough to make enough profit with a direct-to-consumer service. Amazon is in the streaming video business to drive their online store business, Apple to sell iPhones, and Disney everything that is connected to their brands. With the increased competition for the viewer’s limited time, video is in most cases not enough.

For Disney and other content producers, selling content rights to distribution partners has been a profitable business and will still be for some time. This revenue stream is now shrinking with cord-cutting and direct-to-consumer services has been the planned successor. Currently, each cable subscribers pay nearly $10 per month for ESPN and ESPN2, while ESPN+ subscribers pay $6.99 per month.

Additional revenue streams

With this in mind, it’s logical to see that any direct-to-consumer streaming service must explore additional sources for revenue. Advertising would be an alternative to subscriptions and, as many explore, a combination of subscriptions and advertising. But it’s still just different ways to pay for video, either with money or time.

In earlier episodes of Game of Streams, I’ve described the analogy with a supermarket that is built to keep customers engaged as long as possible. A supermarket has apart from stores restaurants, cinemas, daycare, gyms, and other facilities that entertain the customers and create revenue sources.

In the streaming video world that would be the same as offering podcasts connected to the movies, series, or sports events. Or to sell merchandise connected to the brand. All to ensure that you keep the viewers/customers engaged and willing to pay a bit more. Engaged customers are likely also less likely to churn.

To watch out for the coming months…

IBC is coming up in September. This is the first large in-person event in Europe in more than two years and the expectations are building up. I will be in Amsterdam during IBC so please reach out if you would like to meet up.

Magnus Svensson is a Media Solution Specialist and partner at Eyevinn Technology. Eyevinn Technology is the leading independent consulting company specializing in video technology and media distribution.

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